Before agreeing to the licensing or assignment of technology rights with foreign companies or individuals, technology owners should determine whether any export regulations are implicated. Complex rules governing what can be exported, with whom a company can do business and how business is conducted apply to every aspect of international technology transfers and licenses.

IPH2 lawyers are at the forefront of these challenges, international trade regulation and the application of the technology transfer and licensing to international commerce. From Treasury Department sanctions to Commerce, State and Energy Department export controls, our attorneys have assisted U.S. and multinational corporations in developing compliance safeguards to avoid problems and effective defense strategies to deal with issues that develop notwithstanding compliance efforts.

In general terms, there are some basic considerations when engaging in international commerce.

What export control regulations are applicable when commercializing technology internationally?

Before providing any service (including banking, brokerage, etc.), exporting commodities, or transferring technical data or know-how, a U.S. company needs to determine if trade with the party is permitted. The Departments of Treasury, Commerce and State maintain lists of parties who are prohibited from receiving certain U.S.-origin goods, technology, know-how or services.

The Department of Treasury, Office of Foreign Assets Control, enforces embargoes and prohibits business transactions of any type with parties on the Specially Designated Nationals and Blocked Parties List found on the department's web site, U.S. Department of Treasury. Trading with a denied party can result in expensive civil and criminal penalties, and expose the company to shareholder actions and other litigation.

The Department of Commerce, Bureau of Industry and Security, publishes two lists of parties who are denied access to any U.S.-origin technology or participation in any export-related transaction:

• Denied Persons List
  


• Entities List
  

A third list, called the Unverified List, contains the names of entities which require additional scrutiny prior to engaging in export activity.

These lists can be found at the Department of Commerce web site, U.S. Bureau of Industry and Security. Significant civil and criminal sanctions can apply to violations of these prohibitions. As with any violation of law, attendant shareholder actions are always a risk.

The State Department maintains the Debarred Parties list. A "debarred party" is a person or company that is not allowed to participate (receive or send) in the export of defense articles or to provide defense-related services.

At a minimum, a U.S. company should check new customers against these lists, compare additions to the lists against current customer files, and check again prior to exporting. When making these checks, it is advised to search with several independent variables of information, e.g., name, telephone, fax and address. This will minimize the chance that trade will occur with a prohibited party who merely changes a name or address.

In addition to the Departments of Commerce and State, there are several other federal government departments and agencies whose regulations impact international trade. A few examples include:

• Nuclear Regulatory Commission, Office of International Programs: Controls the export of technologies that relate to certain aspects of nuclear power generation.

• Department of Energy, Office of Arms Controls and Nonproliferation, Export Control Division: Licenses nuclear technology and technical data for nuclear power and special nuclear materials.

• Department of the Interior, Division of Management Authority: Controls the export of endangered fish and wildlife.

• Drug Enforcement Administration, International Drug Unit: Controls the export of controlled substances.

• Patent and Trademark Office, Licensing and Review: Controls the export of unclassified technical data in the form of patent applications or modifications sent abroad.

A complete list of departments and agencies that exercise control over exports can be found at U.S. Bureau of Industry and Security.

Can you sell what you want?

A good rule of thumb is that everything leaving the country is controlled for export purposes. While some exports require specific licensing, most exports leave under a general license or the designation "NLR" (no license required). Exports of know-how, such as the exchange between an engineer and a customer, may require specific licenses.

"Exports" can occur in unexpected ways, so it is important to be mindful of export regulations. For example, "exports" occur even within the United States. A non-U.S. national touring a plant may receive an export of know-how that requires a license. The hiring of a foreign worker and exposing that employee or consultant to your know-how may trigger a license requirement. Likewise, some web site content that transmits technology (i.e. know-how, technical data, training or software) can implicate export regulations and require a license.

Department of Commerce, Bureau of Industry and Security:

• The Export Administration Act and the Export Administration Regulations control the export of technology (which includes any item, commodity, know-how, technical data or software).
  


• Most exports fall within the Bureau of Industry and Security's jurisdiction.
  

Department of State, Office of Defense Trade Controls:

• The Arms Export Control Act and the International Traffic in Arms Regulations control the export and import of defense services and defense articles.
  


• Defense articles can include software, commodities or services that are specially designed or modified for military use. This means that civilian-use technology can fall within State Department jurisdiction depending on modifications. Exporters in the high-tech field are often unaware of this possibility and can inadvertently violate these controls.
  

Publicly available information and the Internet:

• Publicly available data in the form of software, printed books, records, pamphlets, newspapers, maps, sheet music, etc.; other publicly available data, such as data that are the product of fundamental research; data that are educational; and data included in certain patent applications generally fall outside the scope of export controls.
  


• However, transmitting technology (i.e. know-how, technical data or software) that is not otherwise publicly available on the Internet or providing defense services through the Internet can constitute an export for which a license may be required.

Can you do business the way you want?

The Anti-Boycott Regulations:

• The Department of Commerce regulations prohibit U.S. persons from trading with or supplying information to particular countries. The regulations also prevent an exporter from refusing to conduct business, or from supplying information, in support of a boycott aimed at a country with which the U.S. has friendly relations, such as Israel. If an exporter receives an invitation to participate in the boycott or a request for information supporting the boycott, the exporter has an affirmative duty to report to the Anti-Boycott Office of the Department of Commerce.

Foreign Corrupt Practices Act:

• The Foreign Corrupt Practices Act prohibits bribery of foreign government officials or parties by U.S. companies and citizens. Under the Act, criminal and civil liability may be imposed against persons who make promises or payments of money to foreign officials in order to influence a business decision.

What is involved in developing and implementing export control compliance procedures?

It is a good idea to develop and implement an export control compliance program so that all compliance and reporting measures are documented and filtered through a single point of contact. IPH2 can assist you in drafting and implementing such a program in a pragmatic way to reduce export compliance headaches and inefficiencies.